Budget Control and the Role of the Budget Control and the Role of the NationalNational
Assembly Budget Office in KoreaAssembly Budget Office in Korea
Dr. Jhungsoo Park
Director General for BudgetAnalysis
NABO, Korea
contents
1. Introduction
2. Government Spending and Budget Control
3. Executive vs Legislative Power of the Purse
4. Details about the NABO in Korea
5. Conclusion
New budget policy in Korea
• Medium-term expenditure framework
• Top-down budgeting system
• Performance management
• Digital budget and accounting system
Structure of Korean government and the budget process
• Focus on the issue “Can legislature gain an effective voice in budget policy?”
• Weak role of National Assembly in budget process, traditionally
1-11-1
The budget process and the decline of control capacity
Today’s process is a layering of various processes developed over time
Significant development
• Budget committee (standing, but special)
• NABO
The decline of independence and control comes from three external development
• The rise of disciplined political parties
• The enormous escalation in public spending
• The rise in interest groups and corporatist political arrangements
1-21-2
New roles requires
Legislators have to define a new role
• Promoting fiscal discipline
• Improving allocation of public money
• Stimulating administrative entities to manage their operations more efficiently
Fulfilling these new roles requires
• Enhancement of legislative capacity and resources
• Changes in both executive and legislative budgeting
• New tools for reconciling long term commitments
• Redefinition of relationships with the government
1-31-3
Characteristics of legislative budgeting
The legislature participates with the government in developing budget policy
Still vote estimates
Setting out a medium-term framework
Sectoral allocation policies
Statements of policy
1-41-4
Three restrained characteristics of legislative budgeting
• Budgets limit what the legislature may do with public money
• Budgets intrude on other legislative functions, such as law-making
• Budgets have the potential to turn legislative work into a technocratic exercise
Focus on three subjects
• Government Spending and Budget control
• Executive vs legislative power of the purse
• Role of the National Assembly Budget Office
1-51-5
There are three major causes for the fiscal outcomes
• General performance of the economy
• The political commitment to fiscal discipline
• The institutional arrangements for budgeting
Current legislative work on the budget
• To discipline public finance by constraining the fiscal aggregates
• To enlarge the legislature’s role in revenue and spending policy
2-12-1
The seven institutional features that the OECD recommends
Medium-term budget frameworks
Prudent economic assumptions
Top-down budgeting techniques
Relaxing central input controls
Focus on results
Budget transparency
Modern financial management practices
2-22-2
The theory of bureaucracy by William Niskanen
• … want more for their agencies and programs
Anthony Downs
• “Why the government budget is too small in a democracy?”• … voters are consistently misinformed
Gordon Tullock’s theory• growth of the bureaucracy is self-generating
William Riker’s theory• Rulers are trapped in a system of exchange of benefits• The larger government grows, the more policies become their own causes
2-32-3
Legislative roles and information needs R
ole
in
Policy M
akin
g
N
eed
for
Info
rmati
onTransformative Legislature
Informed Legislature
Emerging Legislature
Rubber Stamp Legislature
3-13-1
Heart of executive-legislative relations
The Budget Process
AccountingSystem
Cash/DebtManagement
System
BudgetingSystem
ManagerialReporting
InternalAudit
CONTROLS
INTERNAL
FinancialReporting
IndependentAudit/Evaluation
Public Accountability
Planning
BudgetingRevenue &Expenditure
3-33-3
Legislative powers to amend the budget
Rights Number of countries
Unlimited powers to amend the budget 32
Reductions of existing items only 17
May reduce expenditure, but increase only with permission of government
4
Increases must be balanced with commensurate cuts elsewhere 13
Rights not specified 15
Total 81
3-43-4
In practice, does the legislature generally approve the budget as presented by the government?
With no changes
With minor changes only
With significant changes
Australia X
Austria X
Canada X
Czech Republic X
Denmark X
Finland X
France X
Germany X
Greece X
Hungary X
Iceland X
Ireland X
Italy X
Japan X
With no changes
With minor changes only
With significant changes
Korea X
Mexico X
The Netherlands
X
New Zealand X
Norway X
Poland X
Portugal X
Spain X
Sweden X
Switzerland X
Turkey X
United Kingdom
X
United States X
Total 6 17 4
Percent of total
22% 63% 15%
3-53-5
Comparison of the growth rate of GDP and government budget in Korea
Comparison of the Changes of GDP andGovernment Budget
-20
-10
0
10
20
30
40
50
60
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Growth rate
Year
Changes of Government Budget Changes of GDP
3-63-6
Legislative influence
Explaining the differences
• Presidential vs parliamentary systems
• Design of parliamentary powers to amend the budget
• Party political dynamics
• Legislative budget research capacity
• Access to relevant information
• Legislative committees as the engine room for financial scrutiny
• Time for scrutiny and the timing of the budget process
3-73-7
Strengthening the capacity of the legislatures
Responsible and effective legislative action on the budget depends on adequate information concerning the activities financed with public funds and the results ensuing from government programs.
The supply of information has enriched by building the capacity of audit offices and independent budget office to assist the legislature.
To make effective use of the avalanche of information, modern legislatures have added staff, invested in IT, and professionalized their operations.
Examples in the US and in a number of other countries (Philippines, Uganda, Poland, Georgia) establish that a nonpartisan, independent, objective, analytic unit can provide budget information without polarizing the relationships between the executive and the legislature.
3-83-8
General information
NABO was created by the National Assembly Law (Article 22-2) on October 20, 2003
Mission
• Conduct research and analysis on budget and fund, settlement of accounts, and performance of fiscal operations
• Estimate costs for bills
• Analyze and evaluate national programs and medium/long-term fiscal requirements
• Conduct research and analysis on the requests by committees or members of the National Assembly
4-14-1
NABO’s organization and staffing
NABO has about 92 full-time staffs
Chief appointed by the Speaker and approved by the House Steering Committee
Chief appoints all NABO staff, in case of higher level approved by the Speaker, based solely on professional competence, not political affiliation
90+% of NABO professional staff hold advanced degrees in economics, public policy, accounting or related fields
4-24-2
Five objectives which the NABO pursuits
Set its status as a specialized organization with authority supporting fiscal control
Make sure the national budget is well spent by making analyses of budget and economic policies
Analyze budget and economic issues based on public opinions
Produce reliable research results through enhancing its expertise
Establish a reputation as a world class budget analysts and policy evaluators.
4-34-3
Job philosophy
Impartiality
Timeliness
Responsiveness
Expertise
Excellence
Reliability
Activeness
4-44-4
Organization of NABO4-54-5
The success of reforms and innovations in budgeting will ultimately be determined by the cooperation of the legislative body
The importance of talking full advantage of the opportunities offered by developments in IT system
Rather than as controllers of public finance, legislatures should aim to promote fiscal discipline, improve the allocation of public money and stimulate public bodies to manage their financial operations more efficiently
In order to do this, it is necessary to enhance the legislative capacity to deal with budget issues.
5-15-1
Thank you for your attention
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